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Structuring Leveraged Loans: Tax Concerns, Multinational Entities

Section 956 Deemed Dividend Rules, Limits on Interest Deductions, Tax Distributions, Corporate vs. Pass-Through Borrowers

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE webinar with Q&A

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Conducted on Tuesday, January 21, 2020

Recorded event now available

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This CLE course will examine the impact of tax reform on leveraged financing transactions. The panel discussion will include how the new law might affect credit support between affiliates in multinational enterprises, structuring and placement of debt, interest deductibility, and provisions regarding prepayment and permitted tax distributions.


Tax reform and other recently implemented regulations have made significant changes to the tax rules that impact leveraged finance transactions. Counsel to both borrowers and lenders need a working knowledge of these changes concerning both existing and future loans.

New limitations on the deductibility of interest may force leveraged companies to reconsider their global capital structure and pursue measures such as paying off debt held by U.S. entities and moving debt offshore to foreign affiliates. With the reduction in the corporate tax rate and the application of a new special passthrough tax rate, lenders and borrowers will likely revisit how tax distribution provisions are negotiated and drafted.

Various rules impacting multinationals may affect collateral packages and mandatory prepayment provisions. Lenders may ask borrowers to repatriate foreign proceeds to make prepayments, although the parties will still need to consider state or non-U.S. withholding taxes that could be triggered.

Tax reform and subsequent changes to the rules relating to controlled foreign corporations (CFCs) will cause some entities to become CFCs that weren't before. For some multinational groups, this may result in additional subpart F income to U.S. shareholders and may also lead to shrinking the base of credit support available in a leveraged loan.

Listen as our authoritative panel examines these and other leveraged loan structuring issues after tax reform. The panel will also discuss adjustments that should be made to loan documentation to minimize tax exposure for the borrower while protecting the lender.



  1. Tax reform: an overview of new provisions, new tax rates
  2. New limitations on the deductibility of interest
  3. Impact on multinational groups
  4. Impact of participation exemption and proposed 956 regulation on credit support
  5. More foreign entities deemed CFCs: effect on credit support to noncorporate U.S. shareholders
  6. Tax distribution and prepayment provisions


The panel will review these and other key issues:

  • What are some of the implications of tax reform and other recently proposed regulations for multinational enterprises seeking leveraged financing?
  • To what extent do the new 956 regulations allow foreign affiliates more flexibility in providing credit support to U.S. borrowers without triggering adverse tax consequences? Will lenders begin to require such credit support?
  • How might the reduced corporate and special passthrough tax rates affect tax distribution provisions for borrowers that are taxed as corporations and borrowers that are taxed as partnerships?
  • Why might lenders now require borrowers to make prepayments with foreign proceeds?
  • How will new rules defining CFCs impact the ability of multinational borrowers that use specific sources of credit support?


Dundon, Mark
Mark Dundon, P.C.

Kirkland & Ellis

Mr. Dundon's practice focuses on the tax aspects of complex mergers, acquisitions, divestitures, joint ventures,...  |  Read More

Kim, Anne
Anne Kim, P.C.

Kirkland & Ellis

Ms. Kim has a broad-based practice and handles a wide range of complex transactions, advising private equity funds,...  |  Read More

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